World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Thursday, December 11, 2008

When my daughter (who is about to graduate from college) was a new teenaged driver, she was involved in an accident (that she obviously didn’t see coming), and the car was extensively damaged, much like our economy. I could see that it was clearly totaled, but my daughter did not understand how that “little” damage could total her means of mobility and independence. So I played along and we got an estimate from the repair shop. As the shop began to detail the expenses, the nice man started with a figure that was half the book value of the car and started adding up all the “other” expenses. When he got about $2,000 ABOVE the book value of the car, the MATH was speaking in the same manner as the math in our economy is now. “No need to keep adding,” she realized. It was TIME FOR A NEW PLAN.

The damage all adds up to considerably more than $300,000 per person in the United States. Head a family of four? YOU are responsible for your share of more than $1.2 million of debt and obligations. Do YOU have it? The real question, of course, is can the efforts of our aggregate labors reasonably be expected to pay these massive debts back? Are tax cuts going to help that situation? Does spending more on BIG GOVERNMENT help that situation? Uh huh, that two year old can see the forest clearly while those on CNBC, and in Washington D.C., are staring at trees.

There is a saying that probably has its roots in parabolic curves, and it goes like this; “Things that can’t go on forever, don’t!” Can you say, “Military industrial complex?” Remember all those parabolic debt curves, what happens when that parabolic growth ends?

For a quick review of parabolic moves, please spend ten minutes with the good professor, Dr. Bartlett:

The Most IMPORTANT Video You'll Ever See – Part 1 (approximately 9 minutes)

If that subject interests you, he goes on to talk about global population, city population growth, oil consumption, and more in 8 total parts. To see those, just double click the picture to go to YouTube, look immediately beneath the screen and you will see “part 2 of 8.” Click on that then repeat. It’s interesting although the teenagers in his class are doing the typical American “could care less.”

The good Dr. Bartlett knows math! He understands and clearly explains the exponential function that creates parabolas and what ultimately happens to all of them! Are you picturing those debt graphs in your head? How about our stock market?

Well, let’s see what the person who I consider to be the number one technical analyst has to say about our market and what the charts are telling him: According to Robert McHugh, Ph.D., whose work can be found here, https://www.technicalindicatorindex.com, "We now find ourselves in a catastrophic Bear Market, Grand Supercycle degree Wave {IV} down, which is correcting a Bull Market from 1718, before the United States even started.”

Shazaamm! That’s one heck of a bull run, and it’s over… now? Well, that’s not all he has to say, he goes on to explain the meaning of breaking the 2002 lows and adds, “It means there is a very high probability that we are going to see new lows far below Thursday’s 752. This hurricane is not over, not by a long shot.”

And you thought I was a bear? Ha, ha, actually I have always thought Dr. McHugh was a little late to understand the fundamentals, but the technicals have been talking loud and clear to him, so he’s come around. Oh, but he doesn’t stop there! He adds, “…this Bear Market is going to change the world as we know it.”

But wait, he must be reading the same history books as me when he offers this professional opinion, “As clusters of nations merge into new political federations, with likely strong authoritarian structures, it means new currencies are coming. Fiat currencies in existence now will be at risk of being recalled, of becoming worthless, just like the confederate currency did at the end of the Civil War, just like most fiat currencies have ended up in the history of the world.” Wow, that’s a pretty serious statement coming from a conservative professional who has been far more right about these events than the vast majority of “professionals” you may see on the television! Oh, and before you listen to what Jim Cramer or Ben Bernanke have to say about avoiding the 2nd Great Depression, you might first compare their track records with the calls made by Dr. McHugh who adds, “We are likely headed into an Economic Depression.”

Evidently those guys didn’t study history before 1929, for if they did, they might have seen what Martin Armstrong describes as the 224 year Cycle of Political Change. He has traced that cycle back many centuries, describing the rise and fall (or major political upheavals) going all the way back to the Roman Empire… And when you come forward from that time, guess where it lands? Well, what year was our Declaration of Independence signed? Oh, that’s right, it was signed in the year 1776 and when you add 224 years to that you wind up at the year 2,000!

“…Primary wave B should provide a powerful rally, and then Primary wave C should unfold in another series of abc's into the final bear market low. Typically the C wave of any bear market is more devastating than the A wave. Please keep this in mind during the Primary wave B phase of the bear market. B wave rallies during bear markets are often mistaken for new bull markets. This mistake often lures investors into buying into the rally rather than selling. Remember we're only about halfway through the recession.

…Should this scenario unfold, this [wave B] will provide the last opportunity to exit this market before Primary wave C unfolds.”

Now, I don’t mean to just pile on here, but all the experts I follow are beginning to get on the same page. I’m NOT cherry picking for this article, these are the advisors who I have followed for a considerable length of time – they are the ones who have been most correct. Mind you these are not people who are negative by nature, they are responding to what they see, they are the true experts, not the media “yes” men. Like me, these people were at one time bullish on the markets and could see them going higher. Sure, they saw the debts beginning to mount, but most people did not see the parabola and did not understand the ramifications.

So, I’m not the only one who sees events unfolding in pretty much the same manner. I spelled out my technical viewpoint in my article “Half Way to Zero” (http://economicedge.blogspot.com/2008/11/half-way-to-zero.html) in which I explain that breaking the 2002 lows means that, from an Elliott Wave perspective, we are going through a Grand Supercycle correction of the last 5 waves that spanned well over a century in time. Wave 5 up ended, or double topped with the peaks in the years 2000 and 2007. This notion is backed up by further observations and comments made this past Monday by the hard working and very conservative Dr. McHugh who gave his permission for such a lengthy quote:

“Wave (B) up will likely be a 3 to 4 month rally, and a last opportunity to raise cash before a cataclysmic decline occurs starting by mid-2009 and lasting into 2010. This is a Grand Supercycle wave {IV} Bear Market occurring, correcting a wave {III} up that started before the United States of America existed. Grand Supercycle degree waves change nations and empires. It is of a higher degree than the Great Depression of the 1930’s, meaning the fallout will be worse. So use this gift, wave (B) up, to prepare. Do not rely upon any lines of credit at any financial institution. They could yank them. Cash is king in a Depression. Look for cash from all sources. A bird in hand is worth two in the bush. Build up cash. Bank FDIC insured accounts, U.S. Government short-term securities, Gold and Gold coins, these are the primary assets in our conservative investment portfolio model, an investment educational tool – not trading advice – and it has outperformed the stock market, the real estate market, and pretty much all markets by a country mile in 2008. That asset mix still looks good to us as we head into 2009 and especially 2010.” - with permission, Robert McHugh, Ph.D https://www.technicalindicatorindex.com

The italics and bolding are his. This is a man who usually let’s the charts do the talking for him – unlike me!

And one more true expert who I trust and have followed for years, Jim Shepherd, who can be found here http://jasmts.com/, had this to say in his latest monthly newsletter, “As I predicted some time ago, when a debt bubble the magnitude of the one in question bursts, one of the consequences is the mergence of a slowing, deflationary tilting economy. This is precisely what we are seeing, and the rapidity of the progression leads me to believe the outcome will be one of the worst in history.”

Again, this situation is not something to cheer about. It saddens me greatly and I am bringing it to your attention so that you may protect yourself and, more importantly, so that we see the NEED to work on solutions going forward. Such solutions cannot be developed by the central bankers who created the systems that are now failing. Solutions cannot be brought to you by people who do not understand the situation and did not see it coming.

These experts see wave C coming! ARE YOU READY? Can you see what the future will look like at the bottom of wave C?

We have talked about the past, we know the present situation is bad, but many think it’s almost over. The true experts who I have quoted say that isn’t so. What I see at the bottom of wave C is a group of central bankers having meetings all over the world in “emergency” fashion. They will suddenly announce a plan that will be encapsulated on a 1,200 page paper that suddenly appears one evening! That plan will include “a way out,” and it will include more and bigger interest bearing fractional reserve money by fiat, with mega loans to countries in trouble. Thus they will be “saved.” The reality is that they will not be “saved,” they will become imprisoned and controlled by debt – their people and their resources will thus become controlled by the central bank. IT DOESN’T HAVE TO BE THAT WAY!

What I also see coming, without PROPER change, are the “events” that tend to follow economic “events.” WE THE PEOPLE don’t want to go there, while others may profit from such upheaval. Are those the same people who bring you the current interest bearing fractional reserve money by fiat system? Are they the same people who own and control the media? THESE ARE SERIOUS QUESTIONS FOR SERIOUS TIMES!

Real, lasting solutions are definitely possible. To see them, you must understand where we’ve been, where we are, and where we’re likely headed. Once you do, you will realize that what is being discussed to date is just FLUFF. TREES. The forest is the Math which simply no longer works. The roots can be found in the underlying structure of our political, money, and economic systems.

If you understand this, along with the material in my other CUT THE CRAP articles, then you are ready to hear about real solutions. THE TIME TO ACT IS NOW. It is not coming at some point in the future, you are not going to push this math off on your grandchildren, it is here and it is NOW.

Failure to ACT will result in those same people bringing you more America of the CORPORATION FOR THE CORPORATION. That is not acceptable to me! Is it acceptable to you? No, that is NOT our future. Our future is one that is BY THE PEOPLE FOR THE PEOPLE. That includes our money, our economy, and our political structure. THE TIME HAS COME FOR ACTION, you will begin to hear my ideas and views regarding solutions soon. I hope you can keep an open mind and take them in the spirit of which they are intended. I do not pretend to have all the answers. I think I know where the roots lie and know that WE THE PEOPLE can TOGETHER come up with answers that will take us forward UP the evolutionary ladder of our economy and of our nation.